1. For HP case, look at four possibilities-
   1. Have all the six different models shipped to Europe by sea
   2. Have all the six different models shipped to Europe by air.
   3. One generic model, which is to be customized to the need of individual markets (think of postpone strategy), shipped by sea.
   4. One generic model, which is to be customized to the need of individual markets (think of postpone strategy), shipped by air.

Whichever of the four choices gives the lowest inventory (holding + shipping cost).

3. How do you calculate the costs?

• For each scenario, calculate the total inventory.
• Expected inventory + Pipeline inventory = Total inventory

Mode of transport Sea freight Air Lead time (in weeks) 5 Marginal production cost selling price $300 $450 1 Review period (in weeks) by Transportation 1 cost per unit Inventory carrying cost per year sea $10 24% OV service level 98% $25 Exhibit 4 Monthly Demand Data by Region and Option Type Europe Options Mar 42 21 210 432 273 AA AQ AU Nov Dec Jan 80 060 400 255 408 20572 20895 19252 4008 2196 4761 4564 3207 7485 248 450 378 298722700332344 Feb 90 645 11052 1953 4908 19864 1008 5295 219 26617 Apr May 48 87 20316 13336 2358 1676 90 0 204 248 2310315692 June July 20 816 430 10578 6096 540 2310 5004 4385 484 164 1743113405 Aug 54 630 14496 2046 5103 363 22692 Sept Oct 84 456 23712 9792 1797 2961 43026153 384 234 30735 19455 Monthly Monthly Mean Std Dev 42.3 32.4 420.2 203.9 15830.1 5624.6 2301.2 1168.5 4208.0 2204.6 306.8 103.1 23108.6 6244.0 AY 306 Total 18954 Asian- Pacific Options May July Oct Nov 0 216 Mar 1002 156 586 AB Dec 66 255 684 24 219 1248 Apr 6 506 1059 30 Jan Feb 39 27 495 111 519 1425 018 69 141 1122 1722 June 104 0 2409 324 336 1186 Sept 60 144 620 342 Monthly Monthly Mean Std Dev 114.7 281.6 331.6 265.8 1005.9 604.5 31.0 23.5 448.5 555.7 1931.7 750.3 Aug 72 420 1761 18 168 2439 15 AG AK AU Total 15 33 72 636 81 645 1686 30 333 921 1016 844 36 312 2208 354 39 1798 2067 3604 243 2789 792 1688 1955 DO04 N. America Options Nov 20208 4 Dec 16188 0 Jan 22336 44 A Feb 36474 0 Mar 26528 May 36008 June 16604 AB 69 330 330 185 294 AG Apr 32964 135 0 3 0 33102 Monthly Monthly Oct Mean Std Dev 3416426432.1 7377.1 146.2 130.3 0 14.7 30.3 16.2 23.5 0 4.6 34460 | 26611.8 7384.2 AK July Aug Sep 27300 19968 28444 266 0 3 3 0 0 0 0 4 1 275662016028547 0 63 6 26666 53 0 20338 19 0 16216 3 3 0 36344 456 15 0 22525 36480 0 0 6 16940 AU How 2.7 Total Mode of transport Sea freight Air Lead time (in weeks) 5 Marginal production cost selling price $300 $450 1 Review period (in weeks) by Transportation 1 cost per unit Inventory carrying cost per year sea $10 24% OV service level 98% $25 Exhibit 4 Monthly Demand Data by Region and Option Type Europe Options Mar 42 21 210 432 273 AA AQ AU Nov Dec Jan 80 060 400 255 408 20572 20895 19252 4008 2196 4761 4564 3207 7485 248 450 378 298722700332344 Feb 90 645 11052 1953 4908 19864 1008 5295 219 26617 Apr May 48 87 20316 13336 2358 1676 90 0 204 248 2310315692 June July 20 816 430 10578 6096 540 2310 5004 4385 484 164 1743113405 Aug 54 630 14496 2046 5103 363 22692 Sept Oct 84 456 23712 9792 1797 2961 43026153 384 234 30735 19455 Monthly Monthly Mean Std Dev 42.3 32.4 420.2 203.9 15830.1 5624.6 2301.2 1168.5 4208.0 2204.6 306.8 103.1 23108.6 6244.0 AY 306 Total 18954 Asian- Pacific Options May July Oct Nov 0 216 Mar 1002 156 586 AB Dec 66 255 684 24 219 1248 Apr 6 506 1059 30 Jan Feb 39 27 495 111 519 1425 018 69 141 1122 1722 June 104 0 2409 324 336 1186 Sept 60 144 620 342 Monthly Monthly Mean Std Dev 114.7 281.6 331.6 265.8 1005.9 604.5 31.0 23.5 448.5 555.7 1931.7 750.3 Aug 72 420 1761 18 168 2439 15 AG AK AU Total 15 33 72 636 81 645 1686 30 333 921 1016 844 36 312 2208 354 39 1798 2067 3604 243 2789 792 1688 1955 DO04 N. America Options Nov 20208 4 Dec 16188 0 Jan 22336 44 A Feb 36474 0 Mar 26528 May 36008 June 16604 AB 69 330 330 185 294 AG Apr 32964 135 0 3 0 33102 Monthly Monthly Oct Mean Std Dev 3416426432.1 7377.1 146.2 130.3 0 14.7 30.3 16.2 23.5 0 4.6 34460 | 26611.8 7384.2 AK July Aug Sep 27300 19968 28444 266 0 3 3 0 0 0 0 4 1 275662016028547 0 63 6 26666 53 0 20338 19 0 16216 3 3 0 36344 456 15 0 22525 36480 0 0 6 16940 AU How 2.7 Total